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At Microsoft, three's a crowd

Microsoft COO Rick Belluzzo reflects on working with Bill Gates and Steve Ballmer and what it's like to compete in the software company's famously competitive corporate culture.

They say two's company and three's a crowd. Rick Belluzzo has found out just how true that can be at Microsoft.

Microsoft last week unexpectedly announced that its president and chief operating officer would step down May 1, although he will remain with the company through September. Belluzzo joins a long line of outsiders who, after ascending to Microsoft's upper ranks, were pushed aside by the power of the dynamic duo, Chairman Bill Gates and CEO Steve Ballmer.

Belluzzo, 48, spent about 23 years at Hewlett-Packard, where he was in line to become chief executive, before becoming chief executive of SGI in January 1998. He joined Microsoft as group vice president in September 1999 and assumed the post he will be leaving early last year. Under the reorganization that sent Belluzzo packing, heads of Microsoft's major divisions will now report directly to Ballmer.

CNET News.com spoke with Belluzzo to get his thoughts on the challenges faced by outsiders trying to blend in with Microsoft's famously competitive corporate culture and his still-unrealized ambition to run a company.

Q: Why are you leaving the company?
A: The role we defined for the president about a year and a half ago is a role that is very difficult to sustain, given the way we want to move the company. It's a difficult role to continue with...My job was basically getting the product groups and the field and go-to-market aspects of the company to work. I was in the middle, trying to make that work together on an ongoing basis. But the new model going forward is a better model.

The change is a good change, but maintaining my role after that change is not something that's going to be fulfilling to me, and that's not going to be good for the organization. So Steve and I decided that it doesn't make sense--we want to be bold about this new model--as there's not the same role for me as there was before. My desire is to really run something, to run a business. That's what really excited me about my career.

Why the new structure, and why do you think it will be better?
The new model is important because what we've done is define seven businesses. We want those business leaders to take an end-to-end look at them. It doesn't mean that they're autonomous businesses, because so much of what we do at Microsoft is that we share; we build on a common platform, a common set of things. But we really have to have people that are thinking each and every day about business trends. We have to build a way of structuring the company so that those seven leaders can each and every day look at the business from end to end.

"We didn't make good end-to-end decisions about business."
That's not where we were before. Before people would develop products, they would hand them off through my organization to me and we would go to market. We would basically decide how to sell the product, how to support the products. Those results--we didn't make good end-to-end decisions about business. So I believe this change is going to allow us to make those decisions better, to get priorities in place (and) connect with customers better...It's hard for a big field organization, for example, to be able to work across all these areas. By building this model, we're going to take decision-making and push it into these organizations--and I believe make decisions more quickly and focus more on the customers and some of the missions that we have.

Could you give an example of a problem created by the old model?
The old model was an issue of appeal. It was an issue of how much Steve (Ballmer) or someone like myself knew about all the businesses that we're in. On any given day, I could be thinking about how much inventory we should be building on Xbox, while at the same time think about what our vertical solution selling model should be for the pharmaceutical industry. It's fun to be able to work in all those areas, but those decisions need to be made more rapidly each and every day by people who watch over those businesses. Some of the problems in the past were about how quickly could we move.

But isn't there a potential problem that the groups working more autonomously might develop strategies that run afoul of each other?
That's right. That's the continuum you face. I draw a lot from my HP experience, because at HP we had a model something like this. What we are determined not to do is let this go to the point where a single customer is meeting different faces to Microsoft. We have to find the right balance. We don't want a large corporate customer seeing too many different models about how they license software or get support. Steve is going to have to spend more of his time not on making these individual business decisions but on how these businesses work together.

Since you mentioned HP, how was the culture different there from Microsoft?
There is a bit of a difference from Microsoft and HP. I spent 23 years, I think, at HP. HP had a very good culture around execution and delivering products. It was very much operationally sound. At Microsoft, we're kind of tuned up on vision. We tend to have a very exciting vision of the future, about how to use technology. That was always the balance: How do you take something that's really a vision, exciting and innovative, and have the execution capabilities similar to that of HP? That's something we made some progress on, but an area we're going to continue to have to watch on. HP was largely focused on execution and Microsoft on vision.

You were heir apparent at HP and might have become chief executive had you remained at the company. Would you have pursued a merger with Compaq Computer?
I've told people that I think it's a very hard merger. It's been well reported on the challenges of bringing different cultures together. Increasingly, the very difficult thing is rationalizing all the different product offerings and overlap. That's all very hard. I'd have to say I probably wouldn't have. I would have been more concerned about those issues and probably would have declined to not do it. But I'm not close enough to HP anymore, so I have to qualify that.

"The consumer business will mean a lot in the future in terms of revenue to the company."
What would you say is your legacy at Microsoft?
I would split my contributions into two areas. One is the consumer business. When I joined the company, we had a lot of enthusiasm about what we could do, but we had a lot of fragmented investments. We were in the middle of the Internet boom. We were really struggling to get our story together. I brought a lot of clarity to that. We developed a vision about devices. We started to build out that vision with MSN. When I joined the company, we had little revenue, very little presence in that market. Now we have the largest number of users in the world, in 33 countries with 240 million users every month. We probably tripled our Internet access business. We generated substantially more revenue. We launched things like Xbox. The consumer business will mean a lot in the future in terms of revenue to the company.

Secondly, I think I brought a lot to this management change we're talking about and also around relationships and customer orientation that I worked to generate. I spent a lot of time getting our field teams in our company and our customers to work together more effectively. With this change and some of the things I started, I believe Microsoft can become more customer-oriented.

What about .Net My Services, your consumer Web services strategy? Isn't Microsoft in the processing of rethinking it?
Our vision for .Net, the concept or the belief that we need to build a set of XML (Extensible Markup Language) services that are there for people to have access to building scenarios, whether it's authentication or notification. There's a whole range of XML services that are going to be important to build these new applications. I think the way we deliver those and work with customers to deliver those will continue to be altered. While we once had a very long list of .Net My Services, we have narrowed it down to things like authentication and notification, which is work we're still doing. When it was first introduced, it was viewed as very broad with a very large number of services. I think we've narrowed it down, and we are thinking about what customers want inside the firewall (and) outside the firewall. So there's a bit of retuning and rethinking of these solutions.

Is there something you would go back and do differently if you could?
I think the way we launched--defined the president's job--I would have done differently. I'm not sure how it would be different. But knowing where we would end up on this, maybe there was a way to accomplish this (reorganization) and probably put more of my energies on the consumer business while we worked through this transition. I might have approached this differently.

Do you think that if your role as president had been defined differently you and I would not be having this conversation--meaning you wouldn't be leaving Microsoft?
Yeah. Maybe. I don't know.

Any thoughts on the low survival rate of outsiders like yourself taking a top executive position at Microsoft?
If you come in at a high level--meaning you have a lot of responsibility--given all you need to know with respect to the business, it's a big, big learning curve. It's a company where having an in-depth knowledge of a product, a technology (or) a situation is very highly valued. When you have a broader responsibility, it's very hard to make that adjustment. I worked very, very long hours, think I made a lot of progress, knew a lot of stuff, brought a lot of experience, yet always felt like I was trying to uncover more information and learn more about particular areas. Because of the particular management style of the company, when you come in at a very high level it can be challenging.

"Because of the particular management style of the company, when you come in at a very high level it can be challenging."
What was your biggest surprise working with Bill Gates?
I was always surprised how much Bill knew. I wonder how you find time in the day to be on top of how many things Bill seemed to be on top of. Bill is so passionate about technology, and he really is in the right role to focus the vast majority of his time. He always had some value to add, something new to deliver.

Same question about Steve Ballmer.
Steve, being with the company as long as he has, on the business side had a grasp for what each country was doing, what the individual performance issue was in each country. He had a photographic memory for numbers.

Is there anything in the culture of Microsoft you think needs to be changed?
We acknowledge we need to make some changes in our culture...We need in some ways to change the way we work with partners and customers and step up to a higher level of leadership than we have in the past. One area I think is very important is the whole customer-partner relationship. We need to put more time into it...We need to become more customer-focused.

Do you have any idea where you will go next?
I have been so focused on this change from a company perspective, I haven't been thinking about or pursuing something else. I want to run a company. I am very passionate about it. I want to finish the transition here before I think about what my next move will be.